[ by Melanie Gretchen ]

Citigroup CEO Michael Corbat has his work cut out for him.  Mr. Corbat's plan to trim businesses, reduce annual expenses by around $1 billion and cut 11,000 jobs was well received by investors and raised shares by 6% on Wednesday.  Nevertheless, big problems run deep at Citi, where the stock trades at 70% of tangible book value and the industry is still reeling from the ouster of predecessor Vikram Pandit at the hands of chairman Michael O'Neill.

Obstacles Facing Mr. Corbat. 

• the speed with which he assumed the position; after Mr. Pandit was forced to resign on 10/16/12, Mr. Corbat's first task was presenting a budget for 2013 to Citi's board by early December
• the bank's so-called Citi Holdings unit: assets that house $171 billion of businesses, which are pulling down Citi's returns and which can't be wound down quickly
• potentially competing interests: satisfying shareholders'  desire for capital against steering a clear path toward recovery

Progress report. So far, the new CEO is off to a good start.  To off-set the $1 billion charge the bank will take to make the needed cuts, Citi can look forward to annual cost savings of about $900 million in 2013 and $1.1 billion the year after.  According to Mr. Corbat's plan, the bank will:

• close or sell some consumer-banking operations in markets outside the U.S.
• cut branches within the U.S.
• trim back-office operational and technology expense
• streamline some of its capital-markets business, particularly in the cash equities business

It's safe to say that Mr. Corbat's journey is only beginning.  Next on the agenda: submitting a capital plan to regulators in early January and the firm's annual "stress test."  After that, we hope the sky's the limit.

For further details, go to [WSJ, 12/5/12].